Copenhagen still 'golden opportunity' for CO2 market

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A UN summit in Copenhagen next month is unlikely to agree on a new global climate treaty, but carbon market players are urging delegates to seize the opportunity to agree reforms to the USD 33 billion trade in carbon offsets.

There is a growing global consensus that talks in the Danish capital to forge a successor to the Kyoto Protocol will lead to only a political agreement including emissions cuts by rich countries, with agreement on a full binding treaty in 2010.

As Kyoto is due to expire in 2012, next year is later than the December 2009 deadline some had hoped for. But market players say this presents delegates with a chance to address some key issues surrounding the carbon offset market.

"If everyone is pragmatic and asks 'what can we fix while we're here?', this could be a golden opportunity for addressing all the institutional and architectural reforms which don't require any targets to be undertaken by the U.S.," said Miles Austin of clean energy project developers EcoSecurities.

"This could be a very clear win for Copenhagen."

The summit could agree in principle on major reforms, both scaling up an existing Kyoto scheme which rewards clean energy projects in developing nations and a new deal to pay tropical countries tens of billions of dollars to preserve their forests.

Although major developments on these issues could alter the landscape of the global offset market, observers remain sceptical about the ease of progress for complex trading schemes which may take years to fine tune.

"Even if they go to Copenhagen saying 'we are not going to get a binding agreement but we can put as many bricks into place as possible', delegates still have a lot of work to do," said Alessandro Vitelli, director at advisory firm IDEAcarbon.

A full treaty has been delayed as the US hesitates over committing to 2020 emissions targets, after failing to pass a domestic climate law ahead of the 190-nation Copenhagen summit.

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